History shows that corporate insiders’ purchases of their companies’ stock tend to beat stock market gauges on aggregate. Corporate insiders usually purchase shares for one simple reason – they believe their companies’ shares are greatly undervalued by Mr. Market or there are great opportunities for their companies going forward. This line of thought appears to make perfect sense, as it is quite hard to come up with other explanations on why insiders would spend their hard-earned money to buy securities in their own companies (putting more of their eggs in one basket). Insiders may also purchase shares because of stock ownership guidelines imposed by their companies, which require executives and Board members to own a certain amount of equity, though this would mainly apply just to freshly appointed executives.
On the other hand, corporate insiders sell shares for a wide variety of reasons beyond just their companies’ current developments or future prospects, partly owing to the increased usage of equity-based compensation. Nonetheless, heavy insider selling, particularly in the form of clusters of selling, may serve as an indication that insiders believe their company’s share price is approaching or even exceeding a ‘correct’ or ‘fair’ value. That said, let’s look into several noteworthy insider transactions reported with the SEC on Thursday.
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Insiders Stand Behind South Carolina Bank’s Acquisition Strategy
Five insiders at Carolina Financial Corp (NASDAQ:CARO) recently purchased shares through an underwritten public offering, so let’s have a quick look at the most noteworthy purchases. To start with, Daniel H. Isaac Jr., Director of Carolina Financial since 2001, snapped up 8,036 shares on Wednesday at $28 apiece, lifting his overall holding to 78,787 shares. Meanwhile, Board member Claudius E. Watts IV bought 5,000 shares through the offering, a purchase that boosted his ownership to 69,181 shares.
The parent company of South Carolina state-chartered bank CresCom Bank plans to use the $47.7 million in proceeds from the offering to support organic and acquisitive growth, as well as for general corporate purposes. In early-November, Carolina Financial Corp (NASDAQ:CARO) agreed to acquire Greer Bancshares Incorporated, which operates four banking locations in the Greenville-Anderson-Mauldin area, in a $45.1 million cash-and-stock transaction. Greer shareholders are set to receive $18 in cash and 0.782 shares of Carolina Financial for each Greer share at closing. Carolina Financial shares have gained 84% in the past year. Anton Schutz’s Mendon Capital Advisors owned around 103,000 shares of Carolina Financial Corp (NASDAQ:CARO) at the end of September.
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The discussion on the next two pages will revolve around the fresh insider buying and selling at four other companies.
